A majority of charities are failing to explain adequately how they are dealing with the financial risks of a pension scheme deficit, the Charity Commission has warned.
The watchdog's message follows a review that identified 740 charities with incomes of over £500,000 whose accounts showed a deficit. The commission randomly picked 97 of those charities for more detailed analysis.
The 97 charities reported a total pension scheme deficit of over £617m, over half of which was confined to just three charities.
The review also found that only 31 of the 97 trustees' annual reports included an explanation of the financial implications of the charity's pension scheme deficit and of the trustees' plans for tackling the issue.
Sam Younger, chief executive of the Charity Commission, said: 'Pension deficits can pose a potential serious risk for charities.
'This report demonstrates that some charities do not adequately explain how they are dealing with their pension deficit in their trustees' annual report, thereby missing out on an opportunity to demonstrate to their donors and beneficiaries that they are tackling the problem appropriately.'
The commission said it recognises that some trustees whose charity's pension scheme deficit is relatively small may have decided that the financial risk was minimal and did not merit inclusion in the annual report.
Elsewhere in the report, the watchdog found that 60 of the 97 charities were members of multi-employer schemes, most commonly those provided by local authorities.
Seven charities had deficits that amounted to more than their unrestricted funds and over 20% of their annual income.
